Shoppers love a bargain. The likes of Groupon and LivingSocial wouldn’t exist otherwise, and the art of bargain hunting long predates daily-deal sites. Among the key reasons why offering discounts can be such a powerful sales tool: Most people aren’t very good at math.
Consumers’ delight in getting a steal means that sales, coupons, and other forms of discounts can give small businesses a nice cash boost. But discounting comes with considerable risks, too. A Harvard Business School article explains the pricing challenges faced by large department stores like J.C. Penney and Macy’s, for example, where customers have come to expect heavy discounts.
Here are four potential problems to consider before lowering your prices to drive sales:
1. You could devalue your brand.
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